tv Bloomberg Markets European Close Bloomberg January 17, 2018 11:00am-12:00pm EST
vonnie quinn. this is european markets. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org mark: here are the top stories we are covering from the bloomberg and around the world. european stocks heading higher as the trading day goes on. insurance around real estate propping up the stock 600 today. they finish in the green. the debate over selling euros. he is now expressing concern over the currency. from strong you're to weakening dollar. we look into whether there is any really data behind the deadline of the green -- the decline of the green back. have a look at what is happening in european stocks it is a mixed day. iceland is up and others are lowry. mixed day for currencies as
well. the you're is lower, bonds, commodities and cts your final klee columns. g.m. has sold its business to ferriero. the price is $2.8 billion. it is the first substantial step away from the candy industry. it includes butter finger and baby rutta brands. it is the first investment since mark schneider since he took the helm last year. nestle focusing on health, coffee, pet food and water. that is nestle. let's talk about emerging market equities. theriot rising today, highest in almost a decade. stock contrarians are warning the good times may not last.
the chief executive of doubleline says the rally in the dollar will probably be a set-back. goldman sachs and ubs has cited a possible downturn in the sector. but the msci emerging markets goes from strength to strength as evidenced by this chart, as well as the saudi stock benchmark, climbing today, highest level since october of 2015 on expectations that the country will be added to emerging markets. the share gains .2% last year versus that 34% rally in the msci emerging markets index. it has risen 4% so far this year. it is preparing to be the home of aramco, which could be the world's biggestism p.o.
19 minutes into the u.s. trading day. vonnie: we are seeing the rally resume in today's session. we had the rally yesterday morning and meled away by day's end. it is not enough to push u.s. stocks to records again, but it is enough to resume the momentum for now. it is also enough to put the dow just shy of 26,000. it has been flirting with that level. over the past few sessions, it has been the strongest of let's look at what is driving it. the top index point gains in the dow, you are looking at stocks like boeing, which was a top former last year. it is forming its own company with a supplier in the auto industry. a.p.l. is the company with which it is forming that venture. i.b.m. has healthy fundamentals and dat networking starts.
and then united health group continues yesterday's momentum after it came out with earnings and a forecast for the full year that was better than estimated. a handful of analysts have raised their price targets on that stock. but there are stocks that are offsetting some of the gains in the dow. you have goldman sachs which is trading lower after fixed income trading fell 15%. apple getting its highest price target today but getting a downgrade, saying shipments of the iphone not as high as expected. and general electric continuing its underperformance. as we look at the do you, important to keep in perspective as we talk about these 1,000-point milestones, the higher those numbers get, the lesson a percentage basis it takes to get to each of those milestones. that is what this shows, the numbers going higher and higher up to 26,000 and the percentage going down. it doesn't take as much oomph
to get to 26,000 for example from 25,000 as it did to get from 1,000 to 2,000 faksa. finally, take a quick look away from the dow and the u.s., a continued look at the dollar. the canadian dollar following the bank of canada raising interest rates to 1.25%. we have a quarter% move in the dollar. weaker canadian dollar. >> thank you for that. let's check in now on the bloomberg news. here is courtney. on capital hill represent leaders are trying to come up with a stop gap spending plan to stop a shot down. some would provide money for children's health care program. any plan can't pass unless it has some democratic votes in the senate. the two korean delegations will march under one flag next month
at the opening ceremony in the winter alix: in south korea. the two countries will form a giant women's hockey team during the games. treelingsa may is trying to paper over the cracks in the u.k.'s relationship with the u.s.a. she has advised the queen to invite president trump for a state visit, but the president has not set a date. there is speculation he is unhappy that he won't be invited to prince harry's wedding. she is not responsible for wedding invitation. demreble new year's 24 hours a this is bloomberg. mark? mark: courtney, thanks a lot. we hear about the euros with a rise. quote, i am concerned about sudden movements that doesn't reflect a change in fundamentals. he is one of several officials who say a stronger you're may harm ecbf.
the goal is shy of two. joining us from frankfurt. paul on the level of worry, if there was a worry about the strength of the you're in the ecb. where would we be right now? >> i think at the moment there is not concern that the you're is too strong. it could happen in the future. we carry on these paces and inflation doesn't show much sign of underlying strength. insflation down because of oil. there will be increase in oncerns on the donovanning wing unwinding potentially too fast. mark: we are just a week or two away from the next meeting, paul. some some the e.c.b. hoping there will be some sort of tweak to the language at the start of 2018. that is what they heralded. that is what they thought they
end of last year. will we see a tweaking of the language soon? >> we have to take it for face value. he said the e.c.b. is not changing. it has a path and it will change its guide ands. he is not the most influnings person on the governing council. e want to hear from the press. the signs are this time around on january 25th, probably not going to get something. maybe there will be some mild cheeking of the language in march. >> he is in a little bit of trouble with the european union. >> this constitutes administration for me. he was following up on a
complaint from basically a protest group in this field and came up with that after a year-long inquiry. it is not enforceable. the e.c.b. has until april to respond and says it will respond. it has appointmented out that tracking has always been to four of these 30 meetings. it's defense in the past has been that is fine, it has to coordinate. but it is a select group. it is heavily weighted for central bankers. ben bernanke and people like that are there. and senior banker as well. so the concern has been given these are behind closed door meetings and the e.c.b. has oversight over large banks and monetary policy for the you're area, that maybe it is a little too cozy. that is what he seems to think. mark: paul, thanks a lot.
paul gordon joining us from frankfurt. let's chat about the challenges facing central banks in the markets. christine joins us. thank you for joining us today. a lot of the questions have centered on the dollar and the u.s. treasury mark. what is the dollar falling so much and so far? >> there has been progress on the political front, especially in germany, and there have been inflation changes that we have seen coming through, which were quite surprising. we see that it is more a tactical movement that we see. the dollar could go up to 1.25, but other than the longer term, we will see an equilibrium space.the 1.18 or 1.20 mark: how do you see the inflation component? how does that play into your
thoughts? >> i would say -- first of all, e year has gotten off to a very good start. we have seen 4% to 5% returns in all the equity markets. it has been justified on the growth on the g.d.p. front. there are only six countries in the world that have negative or in recession territory here, and we see g.d.p. for the 10th year in a row growing with 3.5% or 3.6% expected g.d.p. growth here. and also on the earnings and equity side. on the fixed income side, you have to watch a little bit. obviously we have seen two 10--year treasury rates returning. they have gone from 80 basis points to 50 basis points. what is more important is five-year real rates. they have come up quite a bit as well.
but it is not varying yet. we have fundamental data on the economic front being good. corporate data is pretty good. you just have to watch the fixed income space, and you have to make some turning on he credit space here because credit has probably peaked as interesting levels. mark: you see under the surface there is high dispersion. how do we play that given that we have been putting bets on certain regions? when it comes to strategy, how does that change the way we bet on these markets? >> i think it has been pretty surprising this year. one of the big trends in the equity market has been low vol, and it has worked as a strategy until the first quarter of 2016. but it has underperformed since. where momentum stocks have outperformed significantly. the spread has gotten wider
over the last couple of months. so this is what surprised a lot of players in the market. having said that, also if you look at the growth for the values, the big pharma friend, the high evaluation stocks, that has gotten further apart, and you have to watch that. there is some to go. growth is the place to be in the environment at the end of the day. if you look at the ratio of historical -- in a historical context, you see it is roughly three standard deviations out. so it is relatively expensive, growth and obal strong support on the equities side, there is some leg to grow here. >> mark: thank you. we will be back in just a second. vonnie? vonnie: we will talk emerging
earnings. a quick question on bitcoin as we are down below $10,000. we have fallen 50% from the high after month ago. are your clients so showing an interest in the cryptocurrency and others? what are you telling them? >> obviously showing an interest. i say always it is a speculative instrument as you can see from the volatility we are experiencing here. if you go back to the facts and figures, block chain is a revolutionary technology and could be disruptive. but it is obviously a very speculative instrument at the end of the day. if you look at where it is actually accepted, there was a report where i looked at the 500 largest online retailers and only four or five of them are actually accepting bitcoin as a means of payment at the end of day. i i think they are about in the very early stages, and also in a stage where there is
exuberance, and it will come back to reality, and eventually cryptocurrencies will be part of the payment system, but we are quite a way off. vonnie: christian, i want to ask you about emerging markets because obviously that is your area of expertise right now, and point to a chart in the bloomberg, the embi bond index for emerging markets. it has had sort of a choppy year, and i wonder what you are anticipating in the coming ye for emerging bond markets, particularly given what is going on in the u.s. and its yield cumpton? >> that is an interesting question. e.m. is really the place to be going forward from a technical perspective and long-term perspective. you look at long-term
marketplaces, it is there. also on the technical time, it is also on the fix the income side. it is all about relative value at the end of the day. if you look at where the spreads are, i was just saying to mark earlier on that in urope, for example, high yield s are lower than european dividend yeemeds there is clearly a case for european equities over high yield, but in evaluation terms, there is a clear case for emerging markets. so we prefer emerging market hard currency and depending on the volatility that is adequate for the client, local currency in the emerging market in the fixed income space. vonnie: why haven't those indexes done better? it doesn't seem like a 3% rise is all that much for investors that are looking for a little
more premium possible. and also, would you buy the indexes, or would you buy something else? >> i think you have to -- in the corporate perspective you can by the indexes, but you have to be very selective. in the e.m. space, countries like indonesia and mexico who have done well, who have a solid debt to g.d.p. ratios and a very solid political environment and so forth. we prefer a more selective approach. in the corporate portfolio, you can buy the indexes, but if you want to go for the higher yields, you have to take foreign exchange risk. so you have to go into local currency, because in hard currency, as i just said, the year pick up is not that impressive. mark: christian, thanks for joining us today. head of global assets at deutsche asset management.
vonnie: our thanks on this side of the pond as well. bank of canada deputy governor is speaking right now. the central bank raised rates today morales as expected. she says hiking rates too slowly would risk a build-up of inflation. you want to tune in later because we are speaking in with a governor, joining bloomberg at 4:30 p.m. eastern, 9:30 p.m. london time. this is bloomberg. oomberg.
he spoke exclusively to bloomberg from his residence on the dubai coast. >> it is softer, but now is the time to acquire land. we had one project, and we did very well. we sold out more than 50%. so we are looking at london as a future long-term market. mark: he also spoke about his prior business dealings with president trump's company, the trump organization. >> we enjoy a very good relation with the trump organization. they have helped us to build and operate one of the best golf courses in the region on or on the global level. they are helping us on a second golf course. but unfortunately, president trump announced last year in january in a press conference that they would not take anymore prodigiouses outside the u.s.a., and they are sticking to their policy. >> so that means if they were to change their policy, you would be open to going for a new project? >> we are a business
organization. if there is a benefit for us and ben fwit for them, we can always look at those deals. mark: also telling bloomberg that he would be more than happy to sell as much as 15% of his majority stake in the company in order to boost the share price. vonnie: fascinating. it is time for the bloomberg business stories. a look at the business. goldman sachs finished a rough year with more problems in debt trading. fixed income trading fell 15% to the lowest level sips the financial crisis. it posted its first quarterly loss in six years. that was driven by change tied to the noah tax overhaul. bank of america showed revenue growth in the fourth quarter. net income jumped the highest in five years. revenue from trading and investment banking beat. analysts wonder if they can leverage that by further
cutting costs or if tax reform will put pressure on to reign in expenses. and whom day sales rebounded this year as tiffany's. ame store sales rows 3% at the jewelry chain. it was helped by the new home and accessories collections, holder luded $90 pencil and $450 rulers. that is your latest bloomberg business slash. mark: my kids won't be getting one of those. take a look at the marino mark trading as we head to the close. stocks are lower today. this is bloomberg.
predominant hue is read today as european stocks for the second day in a row. wall street is a different story. the earnings season is just beginning here. forecast first quarter sales railing analyst's estimates. the disappointing forecast oming despite earnings for revenues. a bit of an m&a day today. let's talk about ubm. look at shares of ubm rallying by 12% today. they are in discussions to buy ubm. it would unit two management heavyweights. 63 pence for each ubm share or
972.5 pence. it represents about a 33% premium on the price from onday. informa have been consolidating. i want to finish with gkn. gkn shares up by 1.4% today, rejecting its 7.4 billion pound bid for melrose, saying terms from the offer are effectively unchanged from the prior bad. they are a maker of aerospace and automotive components. the previous offer was 405 pence. gkn is a key supplier to boeing, to airbus. it said last week it will split into two businesses as it named
ann stevens to the top job. gkn up by 1.4%. vonnie: it is looking more volatile here. we are still below 12, but something to get more excited about given we have been in single digit territory so long. on bloomberg earlier, john schneider gave an interview in which he said the five-year yield is about 30 basis points below about it should be, where the market is pricing in rate headaches. we are going to get possibly three this year, at least two. money has been coming out of gold just as it went into it a little bit earlier. and bitcoin is under $10,000. it has recovered a little built from where it was. it is still down almost 8%. w.m. world markets is the next function i am looking a lot. you can see that canada is a little higher.
that is a little bit on consumer discretionary stocks which are higher, and the u.s. s&p 500 s&p 500 -- the issues s&p 500 makes advances. mark: the dollar rebounding. the e.c.b. weighing on the euro. you never know what well throw at mark gilbert. the death of the dollar was the theme of one of your gadfly pieces lately. has it been overstated? >> greatly exaggerated. the u.s. is still ahead. the eurozone is improving. you have a better economic outlook, a central pang that is tapering, you have the e.c.b. possibly looking at halting its bond performs in september of this year. you have him talking about rate
headaches. he said the market is right to think about them in the middle of next year, but he is putting it back on the agenda. that is why the you're is strengthening. but the dollar is not over. still the most used international currency. it is the most used for international tradges actions. if you google death of the dollar, you will find a million entries for it. bundes bank is talking about moving to the yuan. >> tiny steps. the e.c.b. has about 500 million euros. it does not signal the yuan replacing the dollar in terms of choice. vonnie: which is one you are most watching this year, is it the federal reserve balance sheet or should they be
watching others? >> it is all about the e.c.b. it is going to halt its bond purchases in september, i think. it could extend. i think the inflationary outlook will be robust enough. it is still main driver of pumping money into the global economy. it looks like the market is accepting fact that bond buying will be over. yields are rising for same reason that the euro is on a bit of a terry. because the economic outlook is better, the inflation outlook is better. that is alug the central bank to move towards policy normalization, which is a good thing. vonnie: if we are to see something like a taper tantrum? would we so it in spreads? where would that occur? >> in recent years, it has been something of a widow-making trade.
it has been the most mispriced market in the world. but the german yield has failed to rise several times. the bond market is a risky business. if there was to be a shock, if the e.c.b. was to start talking about a rate increase in fourth quarter, then the german yield is where you would see that, and that is why investors would start to feel some pain. mark: a lot of attention has been paid to the 10-year field briven the calls, whether the u.s. is or not in a bear market. you say the high for the 10-year will be much lower in this cycle? >> it will. if you look on a 30-year long-term trend channel basis, the 10-year u.s. yield is challenging the top of that channel. but the fed, even if it raises rates three times this year, still leaves rates at a low level. it will be lower than the
10-year average in last 40 years. it shows the global economy is healthy. we should all welcome it. market?e we in a bear >> no. i don't think we are a bear market yet. calling the bear market in bonds last year would have cost you your job we have said many times in many ways. morning thank you, mark gilbert. you can find his commentary on bloomberg. vonnie: and scouts as well on twitter. there are a lot ways to talk about mark gilbert. courtney has news. >> federal reserve governor germany powell is one step closer toward being chairman of the central bank. the central banking committee has aproofed powell. only elizabeth warren voted against him. a white house lawyer formally
sked seen bannon to cite executive privilege. the former white house strategist triggered a battle with white house investors by refusing to ask questions as a closed hearing. they have now sabeaned him. turkey is ted to extend the sate of si for the sixth time. the designation has allowed a massive crackdown of suspected supporters of the muslim based glen, who turkey said was behind the coup attempt. and jimmy carter is working on a book about his religious faith. it will tell how religion has sustained and what role it plays in society. president carter is 93 years old. book is scheduled to come out in march.
hans bishop last week at the health care conference. take a listen. >> we are focused on building an independent company. is our most important strategic partnership. the idea behind it was to work with what i think is the world's leading hematology company. vonnie: abigail joins us now. he doesn't sound too interested in selling. what do you make of it is this? abigail: i would agree with you. t sounds like he is focused on celgene is a great company. most biotech companies want to sell for a high price. the reason the stock may be soaring, last "wall street journal" m&a report was correct. investors taking this report somewhat seriously. a bloomberg intel analyst here, i spoke to him earlier, he said
he thought this was a strong possibility. if we hop into the bloomberg and take a look at the revenue picture for celgene, this will explain why. this is why. we have seen growth from 2013 to 2016 and dropping off. their key drugs are falling off from the big growth perspective. their biggest drug right now is going to be in generic form in 2022. so to some degree they could be fighting off the possibility of that revenue drop. mark: and abigail, what about the price? does celgene have the ability to pay for another deal? abigail: another special shop is saying that $93 a share is possible. ack in 2015, celgene did a $7.2 billion deal. so that would suggest yes, that price tag is a possibility.
it is well above where juno is trading now. they do have the cash on hand. and there is some thinking overall that the republican tax plan could boost things. we will see here that back in 2015 there was nearly $5.6 trillion in deals done. 2016 dropping off a little bits, 2017 still both 2015. here we are early in the year, a few deals done, but 2018 could be a big year. so perhaps that is some reason to think that this deal will happen between celgene and juno. they did say that celgene may continue looking at traditional deals or one-off assets, that they are looking to build up their pipeline. vonnie: thank you for that. after more than two years without a day, nomad has agreed to buy good fellows pizza.
that gives nomad its first significant foot hold in the frozen pizza aisle. we talk with the correia with the c.e.o. of nomad foods, stefan deescheemaeker. >> i want to start with this. you twice are very big in frozen foods, in peas, spinach and fish finger. why does a company like yours get into pizza? >> it is a very exciting time for us because we are doing very well organical. now we are starting m&a. 56 two year, we are preparing ourselves. pizza is a great category for us. it is very, very complementary. it is big in europe. it is complementary to us in the u.k. and ireland. the brands are great, and we love brands. so the combination is excellent. >> one thing we always hear about in the food industry is this pivot torts health indemreedyent. how does that fit into building
this frozen food empire? >> the interesting thing is, even when i starred, i to the conclusion that this is a category, frozen food is really a category where the reality is better than the perception. you think in terms of waste, in terms of natural iningredients, in terms of how to preserve the food is much better. what we have to do is really do a better job as a category leader to explain to the con sumetters and the retailers that it is the right thing to to and that it is a great category. long-term journey, it is really a journey we want to purse right now. >> one thing that has gone on for a while in big good is this disruption that has been called, if you look at 3g, warren buffet, j.e.b. on the smaller end in terms of coming in and buying smaller companies. we have seen this change the way big food thinks about
itself, the likes of kehl objection, campbell's and general mills. does that create opportunity for nomad, or is that part and parcel of existing in the food industry? >> it does. at the same time what we really want to do is to be focused. the mistakes in the past were companies to be some sort of con grand slam rate. we want to be focused. we are leading europe in frozen food to start with, and that is where we are going to create value. what we have been doing over the last two years, it is really focused behind the top line of growth. >> you talked about getting the house in order. obviously the share price was seriously impressed at one point. it has been up 150%, and up again the other day on the news. what would you see in the u.s.? is there something you guy could buy over here? >> frozen food is something we know. so definitely we should not
exclude the u.s. it is a good thing to do. but short term, the coorledation and the synergy is in europe. the concept makes a lot of sense, but short-term, the consideration for the value creation is really starting in europe. >> how does that play out with brexit? obviously that has had an affect on the consumer habits in the u.k. and also on the people's ability to go out and spend. is that something that concerns you guys? >> we are ready. nobody knows exactly what brexit will be unless someone is telling me. but we are getting ready for whatever scenario we could have. but overall we feel confident we are going to get there. that is why we are investing in the u.k. now. >> if the price of goods goes up for you guys, is that something you are able to pass on to consumers. how does a company like yours exposure to
consumer spending, how does that impact you? >> we go with great brands, and we keep investing in great brands. if you have the great brands, then you have what it takes to come up with the right explanation to retailers. the cost of goods are increasing, and we have to pass it off. long as we are building the brands, it is all right. >> you have two enormous deal makers. these guys have built empire after empire through m&a. what is it like for a c.e.o. working? what is culture? >> they are very supportive, very pragmatic. there are times where we rescue, and they were behind us. they were patient. and they defined themselves, and it is pretty well in the organization, as owners versus renters. that is what people like to
hear. with that you can build careers and attract talent. at the end of the day that is what matters. make sure in the oh, you have great talent. you can't have great talent without the long-term view. that is exactly what they offer. >> have you guys got more deals in the pipeline that we should be on our toes before? >> obviously we are preparing orioles, but i have a mantra never talk about any future deals. you have to announce what you have to announce when you are ready. >> thank you very much for joining us. back to you in the studio. vonnie: great stuff. ed with a great interview with the c.e.o. of nomad foods. mark: coming up, it is the battle 6 the charts. he o.t.c. 2018 has seen record hoof after record high for u.s. stocks. are the evaluations justified? this is is bloomberg. loomberg.
vonnie: it is time now for our global battle of the charts where we take a look at some of the most telling charts of the day and what they mean for investors. you can access these charts on the bloomberg by running the function featured at the bottom of your screen. we have an all-britain battle today. at least it takes place in britain. kicking things off, danny. >> if only my british accent were better, i could give you that battle. i will spare you all. bill gross says we are in a bond bear market. what does that mean for stocks, vonnie? i am looking at yellen's favorite chart to figure that out. this is the fed model which plots what i have in white here, s&p 500 earnings yield versus the 10-year yield. it basically says if these lines are far enough part, then it is fine to buy stocks because they are giving you the yield that treasuries are not. look what has happened as the yields on the 10-year has approached 2.6.
this spread keeps getting thinner, vonnie. you might say look, it is the lowest since 2010. the market is starting to look more and more overheated. that is b.t.v. 7085. vonnie: i am at my terminal. i am going to that chart and have it in front of me while mark presents, and i will be able to put the two side by side. mark: on subject of spreads, i thought we would look at the spread between the 10-year of turkey and the 10-year of south africa. the yield differential has risen to the widest since march of last year. this is in the favor of south africa. we have had the election for the replacement zuma as the president and leader of the ruling party, and turkey's strained relations with the u.s. is unnerving investors in turkish assets. the other chart is the turkish lira against the south african
rand. a lovely pass from the bloomberg macrostrategist, he said the movement in the lira isn't justified. had this is a man who has been a massive rand bull. he said investors are underestimating the potential power of corrections and what he calls is the rattlesnake is the rand. rand volatility has collapsed but it is moving overall. turkey economy is set to grow at 3.% in twaret, versus 1.5% for south africa. on a p.p.p. basis, the lira is now more than 10% undervalued compared to the rand. he said don't be misled by the commodity rally. south africa's terms of trade have been collapsing quicker than turkey's in last month. the country is a major importer in oil. e is saying that plunge of
liar isn't justified. 7 .783. john: vonnie: like it. the winner is danny berger because i do like the idea that we are talking about the fed. we didn't mention the base book today. this comes out at 2:00 p.m. eastern. as much as stock evaluations might be where they are. we will see if that is translating at all if that is translating to confidence around the country. ahead. e.t.f.i.q. at 5:30 london time. we will be sopoaga with michael at the top of the hour on bloomberg markets. rkets.
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officials. that triggered a battle with how investors by refusing to answer questions as a closed hearing yesterday. they have now sabeaned him. trump's former campaign manager and senior white house aid are being interviewed today behind closed doors by the house intelligence committee looking into trump campaign contacts with russia. that is according to the associated press, citing two people familiar with the atter. he led trump's campaign for nearly a year before being fired. the new parliament reconvene today and elected a pro is he session speaker. the election virtually guarantees that the push for independence from spain will continue.